INCOME TAXES

6 Months Ended

Jun. 30, 2011

INCOME TAXES [Abstract]

INCOME TAXES

As of June 30, 2011, UIL Holdings had no short-term borrowings outstanding under its money market loan arrangement with JPMorgan Chase Bank.

(E) INCOME TAXES

	Three Months Ended						Six Months Ended
	June 30,						June 30,
	2011			2010			2011			2010
	(In Thousands)
Income tax expense consists of:
Income tax provisions (benefit):
Current
Federal	$	(3,639	)	$	12,777		$	18,274		$	25,540
State		(1,683	)		3,170			5,593			5,752
Total current		(5,322	)		15,947			23,867			31,292
Deferred
Federal		15,680			(5,937	)		15,948			(9,123	)
State		398			(2,410	)		2,000			(4,054	)
Total deferred		16,078			(8,347	)		17,948			(13,177	)
Investment tax credits		(48	)		(36	)		(97	)		(73	)
Total income tax expense	$	10,708		$	7,564		$	41,718		$	18,042

The combined statutory federal and state income tax rate for UIL Holdings for the three and six month periods ended June 30, 2011 and 2010 was 40.4%.

Differences in the treatment of certain transactions for book and tax purposes cause the rate of UIL Holdings’ reported income tax expense to differ from the statutory tax rate described above.  The effective book income tax rates for the three and six month periods ended June 30, 2011 were 43.1% and 38.7%, respectively, as compared to 39.7% for each of the three and six month periods ended June 30, 2010.  The decrease in the 2011 effective book income tax rate for the six month period ended June 30, 2011, was due primarily to the flow-through book/tax differences associated with the Gas Companies in the six month period ended June 30, 2011 which were not reflected in the six month period ended June 30, 2010.

The decrease in current income tax expense for the three and six months periods ended June 30, 2011, compared to the three and six month periods ended June 30, 2010, is primarily due to federal income tax benefits associated with additional tax deductions for capital recovery of plant placed in service during 2011 and pension plan contributions made during the 2011 periods.  These current income tax effects are deferred for book purposes resulting in an offsetting increase in deferred income tax expense.